(Fortune) — The great mystery surrounding the historic health care bill is how the corporations that provide coverage for most Americans — coverage they know and prize — will react to the new law’s radically different regime of subsidies, penalties, and taxes. Now, we’re getting a remarkable inside look at the options AT&T, Deere, and other big companies are weighing to deal with the new legislation.

Internal documents recently reviewed by Fortune, originally requested by Congress, show what the bill’s critics predicted, and what its champions dreaded: many large companies are examining a course that was heretofore unthinkable, dumping the health care coverage they provide to their workers in exchange for paying penalty fees to the government.

That would dismantle the employer-based system that has reigned since World War II. It would also seem to contradict President Obama’s statements that Americans who like their current plans could keep them. And as we’ll see, it would hugely magnify the projected costs for the bill, which controls deficits only by assuming that America’s employers would remain the backbone of the nation’s health care system.

Hence, health-care reform risks becoming a victim of unintended consequences. Amazingly, the corporate documents that prove this point became public because of a different set of unintended consequences: they told a story far different than the one the politicians who demanded them expected.

Why the write-downs happened but the hearings didn’t

In the days after President Obama signed the bill on March 24, a number of companies announced big write downs due to some fiscal changes it ushered in. The legislation eliminated a company’s right to deduct the federal retiree drug-benefit subsidy from their corporate taxes. That reduced projected revenue. As a result, AT&T (T, Fortune 500) and Verizon (VZ, Fortune 500) took well-publicized charges of around $1 billion.

The announcements greatly annoyed Representative Henry Waxman, who accused the companies of using the big numbers to exaggerate health care reform’s burden on employers. Waxman, chairman of the House Energy and Commerce Committee, demanded that they turn over their confidential memos, and summoned their top executives for hearings.

But Waxman didn’t simply request documents related to the write down issue. He wanted every document the companies created that discussed what the bill would do to their most uncontrollable expense: healthcare costs.

The request yielded 1,100 pages of documents from four major employers: AT&T, Verizon, Caterpillar and Deere (DE, Fortune 500). No sooner did the Democrats on the Energy Committee read them than they abruptly cancelled the hearings. On April 14, the Committee’s majority staff issued a memo stating that the write downs were “proper and in accordance with SEC rules.” The committee also stated that the memos took a generally sunny view of the new legislation. The documents, said the Democrats’ memo, show that “the overall impact of health reform on large employers could be beneficial.”

Nowhere in the five-page report did the majority staff mention that not one, but all four companies, were weighing the costs and benefits of dropping their coverage.

AT&T produced a PowerPoint slide entitled “Medical Cost Versus No Coverage Penalty.” A document prepared for Verizon by consulting firm Hewitt Resources stated, “Even though the proposed assessments [on companies that do not provide health care] are material, they are modest when compared to the average cost of health care,” and that to avoid costs and regulations, “employers may consider exiting the health care market and send employees to the Exchanges.” (Under the new bill, employees who lose their coverage will purchase health care through state-run exchanges.)

Kenneth Huhn, vice president of labor relations at Deere, said in an internal email that his company should look at the alternatives to providing health benefits, which “would amount to denying coverage and just paying the penalty,” and that he felt he already had the ability to make this change under his company’s labor agreement. Caterpillar felt it would have to give “serious consideration” to the penalty option.

It’s these analyses — which show it’s a lot cheaper to “pay” than to “play” — that threaten to overthrow the traditional architecture of health care.

The cost side

Indeed, companies are far more likely to cease providing coverage if they predict the bill will lift rather than flatten the cost curve. Deere, for example said, “We do expect double digit health care increases as most Americans will now have insurance and providers try to absorb the 15% uninsured into a practice.”

Both Caterpillar (CAT, Fortune 500) and Verizon believe the requirement to allow dependents to remain on their parents’ policies until age 26 will prove costly. Caterpillar puts the added expense at $20 million a year.

How two new taxes and the employer penalty change the health care calculus

First, there is the “Cadillac Tax” on expensive plans. This is a 40% excise tax on policies that cost over $8,500 for an individual or $23,000 for a family. Verizon’s document predicts the tax will cost its employees $255 million a year when it starts in 2018, and rise sharply from there. Hewitt also isn’t sure that Verizon can pass on the full tax to its employees; so it could impose a heavy weight on the company as well. “Many [have] characterized this tax as a pass-through to the consumer,” says the Verizon document. “However, there will be significant legal and bargaining risks to overcome for this to be the case for Verizon.”

In a statement to Fortune, Verizon said it is not, “considering or even contemplating” the plans laid out in the report, though records show the company did send the report to its board shortly after the reform plan was passed by Congress.

Second, the bill imposes new taxes on drug manufacturers, medical device-makers, and health insurance providers. Hewitt leaves little doubt Verizon will be paying for them: “These provisions are fees or excise taxes that will be shifted to employers through increased fees and rates.”

Caterpillar and AT&T actually spell out the cost differences: Caterpillar did its estimate in November, when the most likely legislation would have imposed an 8% payroll tax on companies that do not provide coverage. Even with that immense penalty, Caterpillar stated that it could shave $25 million a year, or almost 10% from its bill. Now, because the $2,000 is far lower than 8%, it could reduce its bill by over 70%, by Fortune’s estimate. Caterpillar did not respond to a request for comment.

AT&T revealed that it spends $2.4 billion a year on coverage for its almost 300,000 active employees, a number that would fall to $600 million if AT&T stopped providing health care coverage and paid the penalty option instead. AT&T declined comment.

So what happens to the employees who get dropped?

And why didn’t these big employers drop employee coverage a long time ago? The Congressional Budget Office, in its crucial cost estimates of the bill, projected that company plans will cover more employees ten years from now than today. The reason the bill doesn’t add to the deficit, the CBO states, is that fewer than 25 million Americans will be collecting the subsidies the bill mandates in 2020.

Those subsidies are indeed big: families of four earning between $22,000 and $88,000 would pay between 2% and 9.5% of their incomes on premiums; the federal government would pay the rest. So policies for a family making $66,000 would cost them just $5,300 a year with the government picking up the difference: more than $10,000 by most estimates.

As bean counters know, that’s not a bad deal for a company’s rank-and-file, and it’s a great deal for the companies themselves. In a competitive labor market, the employers that shed their plans will need to give their employees a big raise, and those raises could be higher, even after taxes, than the premiums the employees will pay in the exchanges.

What does it mean for health care reform if the employer-sponsored regime collapses? By Fortune’s reckoning, each person who’s dropped would cost the government an average of around $2,100 after deducting the extra taxes collected on their additional pay. So if 50% of people covered by company plans get dumped, federal health care costs will rise by $160 billion a year in 2016, in addition to the $93 billion in subsidies already forecast by the CBO. Of course, as we’ve seen throughout the health care reform process, it’s impossible to know for certain what the unintended consequences of these actions will be.

A senior U.S. Federal Reserve official said on Wednesday that interest rates kept too low for too long encourage risky financial behavior and recommended raising borrowing costs to prevent another boom and bust.

Kate Schuler | New AmericaFoundation

Thomas Hoenig

“I am confident that holding rates down at artificially low levels over extended periods encourages bubbles, because it encourages debt over equity and consumption over savings,” Kansas City Federal Reserve Bank President Thomas Hoenig told a group of business people.

“While we may not know where the bubble will emerge, these conditions left unchanged will invite a credit boom and, inevitably, a bust,” he said.

Hoenig is a voter on the Fed’s policy setting panel this year and has dissented against the U.S. central bank’s promise to hold rates exceptionally low for an extended period, arguing it is no longer necessary for the Fed to tie its hands while the economy recovers.

He said on Wednesday the Fed could raise rates to around 1 percent, which would keep borrowing costs at historically low levels while sending a signal that easy money policies put in place during the crisis are steadily being pulled back.

Thursday, April 1, 2010

It’s “deeply unfair” that some financial institutions that got taxpayer-paid bailouts are emerging in better shape from the recession than millions of ordinary Americans.

Geithner also argued that President Barack Obama had no choice when confronted with a financial crisis.

“As the president has said, we had to do some very unpopular things,” Geithner said. “People looked at what had happened.””It’s not fair. It’s deeply unfair,” he said. “He (Obama) had to decide whether he was going to act to fix it or stand back … and that would have been calamitous for the American economy.”

There are only a couple of minor inaccuracies in Geithner’s statements:

Moreover, it is not like their approach fell on them and they couldn’t do anything about it. Geithner, Summers, Bernanke and the boys made a conscious decision to side with the oligarchy at the expense of the people.

[There was a] point at which the government had to decide if it would defend the financial oligarchy from populist outrage, or whether it would reform the financial system that brought us the financial crisis and severe recession. We do not think it was an easy choice. But ultimately Obama and his advisers chose to bet on the bankers they knew. The result has been even larger banks and an even more concentrated financial sector.

Geithner also told the Today Show that he hopes skeptical voters will note legislation moving through Congress to bring reforms to the financial system.

“What happened in our country should never happen again,” he said. “People were paid for taking enormous risks. It was a crazy way to run a financial system.” Geithner said, “It’s the government’s job … to do a better job of restraining that kind of risk-taking.”

Indeed … too bad that Geithner and the boys are still encouraging that kind of risk-taking.

Geithner was, of course, largely responsible for much of the failure of the government to restrain risk-taking in the first place.

Mr. Geithner, as President of the Federal Reserve Bank of New York since October 2003, was one of those senior regulators who failed to take any effective regulatory action to prevent the crisis, but instead covered up its depth.

always the question about what the Fed will do, more pressure on small and medium banks, municipal bond meltdown, bailouts cant go on indefinitely, looking at the banks, and recalling the French Revolution, the truth of fractional banking

The following information may be the most important we have ever published. One of our Intel sources, highly placed in banking circles, tells us that on 1/1/10 all banks that have received TARP funds have been informed by the Federal Reserve that they must further restrict any commercial lending. Loans have to be 75% collateralized, 50% of which has to be in cash, which is a compensating balance.

The Fed has to do one of two things: They either have to pull $1.5 trillion out of the system by June, which would collapse the economy, or face hyperinflation. This is why the Fed has instructed banks to inform them when and how much of the TARP funds they can return. At best they can expect $300 to $400 billion plus the $200 billion the Fed already has in hand.

We believe the Fed will opt for letting the system run into hyperinflation. All signs tell us they cannot risk allowing the undertow of deflation to take over the economy. The system cannot stand such a withdrawal of funds. They also must depend on assistance from Congress in supplying a second stimulus plan. That would probably be $400 to $800 billion. A lack of such funding would send the economy and the stock market into a tailspin. Even with such funding the economy cannot expect any growth to speak of and at best a sideways movement for perhaps a year.

We have been told that the FDIC not only is $8.2 billion in the hole, but they have secretly borrowed an additional $80 billion from the Treasury. We have also been told that the FDIC is lying about the banks in trouble. The number in eminent danger are not 552, but a massive 2,035. The cost of bailing these banks out would be $800 billion to $1 trillion. That means 2,500 could be closed in 2010. Now get this, the FDIC is going to be collapsed before the end of 2010, which means no more deposit insurance. This follows the 9/18/09 end of government guarantees on money market funds. Both will force deposits into US government bonds and agency bonds in an attempt to save the system.

This will strip small and medium-sized banks and force them into shutting down or being absorbed. This means you have to get your money out of banks, especially CDs. We repeat get your cash values out of life insurance policies and annuities. They are invested 80% in stocks and 20% in bonds. Keep only enough money in banks for three months of operating expenses, six months for businesses.

Major and semi-major banks are being told to obtain secure storage for new currency-dollars. They expect official devaluation by the end of the year.

We do not know what the exchange rate will be, but as we have stated previously we expect three old dollars to be traded for one new dollar. The alternative is gold and silver coins and shares. For those with substantial sums that do not want to be in gold and silver related assets completely you can use Canadian and Swiss Treasuries. If you need brokers for these investments we can supply them.

The Fed also expects a meltdown in the bond market, especially in municipals. Public services will be cut drastically leading to increased crime and social problems, not to mention the psychological trauma that our country will experience. Already 50% of homes in hard hit urban areas are under water, nationwide more than 25%. That means you have to be out of bonds as well, especially municipals.

As you can see, the Illuminist program is going to come quicker than we anticipated. That in part is because they have had to expedite their program, due to exposure in the IF, other publications and especially via talk ratio and the Internet. There is no doubt we have the elitists on the run.

We are reaching the masses. On TalkStreamLive.com we were on the Rumor Mill this past week and out of 50 talk radio programs we were 5th behind, Rush, Hannity, Dr. Laura and we were tied with Beck. On the Sovereign Economist on Wednesday night we were 5th behind Beck and Savage and ahead of Hannity. Both these programs are not well known and the Sovereign Economist is only about a month old. It shows you what you can do if you work hard enough at it.

The latest favorable events we are told are the seeds of recovery. The green-shoots of spring are to be harvested before winter sets in. We are skeptical of the strength and duration of such a recovery.

The underlying problems are still not being addressed. The US government and the Fed cannot bail out banking, Wall Street, insurance and government indefinitely via monetization. Impaired corporations, no matter what their size, have to be allowed to fail. Stimulus cannot be used indefinitely. Both have to be reigned in, because the longer this charade continues the worse the final outcome is going to be. As we predicted six year’s ago, Fannie Mae, Freddie Mac, Ginnie Mae and FHA are the wards of American taxpayers, as is AIG. All their financial conditions worsen every day. They have again been insuring subprime mortgages by the thousands and when they begin to reset next year, we will be back to 60% failure rates. Even government admits already they’ll see 20% failure rates. This, so that housing inventory can be cut from 11-1/2-months inventory to 7-months, again in order to bail out the lenders at the expense of taxpayers. Government and the Fed have no exit plans for these sinking ships, particularly Fannie, Freddie, Ginnie and FHA, never mind their meddling in the economy guaranteeing everything is sight. Benito Mussolini would be very proud of what they have done.

Then we have those on Wall Street, banking and corporate America who believe they are doing God’s work by looting the American public making outrageous profits by in part using taxpayer funds, and allotting themselves disgraceful bonuses as unemployment hovers at 22.2%. Haven’t these people heard of the French Revolution? Their arrogance has no bounds. The credit crisis hasn’t ended; the Fed has extended it by throwing money at problems. We have a mortgage market that is worse than it was a year ago, only kept from sinking by a tax credit 3% down. As a result now we have more than $1 trillion of new mortgage failures on the way.

Our monetary base has more than doubled. Interest rates will probably stay where they are for 18 months or more and we even have a dollar carry trade. The 2009 fiscal budget deficit was $1.5 trillion and 2010 will be worse. Government is not cutting expenses. They are increasing expenses.

In addition making matters worse corruption is flourishing via the incestuous revolving door between Wall Street, the Treasury, in a multiplicity of other appointments and with the Fed. Is it any wonder 75% of Americans want the Fed audited and investigated. That said, the present set of circumstances cannot be allowed to go on indefinitely. We cannot keep insurance, Wall Street and banking on life support forever. Not when we finance two occupations and an ongoing war, never mind our unfunded liabilities of Medicare, Social Security, etc. most all of these problems are being financed by debt to be paid by our great, great grandchildren. We just created $12.7 trillion for bailouts and the Inspector General tells us we are presently on the hook for $23.7 trillion. What happens if all the recipients need another $20 trillion?

The situation is still dire and the solution is temporary and unworkable and Washington and New York are well aware of this. The game will play out over the next few years. In the meantime the dollar will move lower and inflation, gold and silver higher.

Economics is not complex; it is very simple. Professors and economists would like to have you believe it is complicated when in fact they make it opaque, so you cannot understand it. The same is true with banking. In normal times through the century’s bankers using the fractional banking system usually lent 8 times their assets, or deposits. It was only until recently that the privately owned Federal Reserve told banks within the system to lend 40 times assets or more in order to accommodate the system.

All this is to cover to confuse and hide the truth of fractional banking. Bankers’ indebt borrowers with money they made up out of thin air. Debt is enslavement by the bankers upon the people by buying almost everyone off. In the final analysis banking is a fraud unless money is interest free. The Fed, and all the other banks are a fraud.

The game as we know it today began in 1694 when the Rothschild’s formed the privately owned Bank of England and the production of bank notes began and circulated along with sterling silver coins. The end result has been that the bankers own the world. The system today is based on confidence and trust, something that has been worn thin. A reflection of the loss of trust and confidence is that 75% to 80% of Americans want HR1207 and S604 passed by Congress, so that the Fed can be audited and investigated. The public no longer trusts the Fed and the banks. As a result the con game may well be coming to an end. Fifty years ago we and a handful of other conservative warriors set out to inform the public of the giant scam that the Fed really was. It has been a long hard road. Gary Allen and Alan Stang are gone and of the originals all that are left are G. Edward Griffin, Stan Monteith, Anthony Hilder and us. During our lifetimes we now probably will see the end of the Fed. Because the people have finally been awakened. It was a long hard battle that may soon come to fruition.

The final step will be the termination of the Federal Reserve and its monopoly on financial theft. Unfortunately it will mean the demise of the only financial system we have known for 315 years. We do not know as yet what the new system will be like, but the con game is over and most of the world’s inhabitants are broke. The debt that is owed simply cannot be repaid. Japan, the US, the UK and Europe will be the first to go followed by most of the rest of the world.

You ask who will be the big winners? Gold and silver of course. Just as we have been telling you they would for 9-1/2 years, since gold was $252.00 and silver $3.80. Look at the gains for those who listened. And, we still have a long, long way to go to preserve our wealth. Over all those years the gold suppression cartel fought to hold down gold prices by selling gold, using derivatives and futures and in collaboration with good producers such as Barrick Gold and others. Hopefully HR3996 (HR-1207) will now pass unchanged and we can take a look at what the Fed and the Treasury were doing and who aided them.

What we are witnessing in the US and world economy is the result of the greed of central banks to make as much money as possible before they have to collapse the system to bring about World Government.

Manufacturing activity in the Federal Reserve Bank of Kansas City’s district improved in November.

2009 will be remembered by millions of ordinary people as the year they lost their job, their house, or the prospect of an education. For the rich, however, it was a bonanza.

The world’s billionaires saw their wealth grow by 50 percent last year, and their ranks swell to 1,011, from 793, according to the latest Forbes list of billionaires.

The combined net worth of these 1,011 individuals increased to $3.6 trillion, up $1.2 trillion from the year before. On average, each billionaire had his or her wealth increase by $500 million.

Four hundred and three billionaires reside in the United States. They constitute just 0.00014 percent of the country’s total population, but control 8 percent of the national wealth. Each of these individuals holds over 300 million times more wealth than the average US resident.

The list included 21 hedge fund managers, who as a group more than made up for whatever losses they incurred in 2008. Some of them, including James Simons, John Arnold, and George Soros, raked in profits during both the collapse and the market recovery.

Topping the list of wealthiest hedge fund managers was John Paulson, at $32 billion. Paulson made billions in 2008 by betting that the housing market would collapse, and billions more through the stock market recovery of 2009.

Only one of the 21 hedge fund managers on last year’s Forbes list fell off. This was Raj Rajaratnam of Galleon Group, who was arrested last year on charges of insider trading.

Hedge fund managers James Simons, John Arnold, and David Tepper got average returns of 62, 52, and 31 percent, respectively, between 2008 and 2010. David Tepper made $2.3 billion over the past year, while John Paulson’s wealth grew by $6 billion.

The number of US billionaires grew to 403, up from 359 last year. The Asia-Pacific region had 234 billionaires, up from 130 the last year. Europe has 248 billionaires, despite having twice the population of the United States.

The 1,011 people on this list command a phenomenal amount of personal wealth. Their holdings are larger than the gross domestic products of every country besides China, Japan, and the United States. The wealth of the 403 US billionaires could more than cover the 2008 US federal deficit, with money left over for the states.

While the number of billionaires on the list is just short of the all-time high of 1,125 reached in 2008, it represents a phenomenal rebound. At this rate, the number of billionaires will once again hit record levels next year.

Carlos Slim Helú, a Mexican telecommunications tycoon, moved up to the first position on the list at $53.5 billion, beating out Americans Bill Gates ($53 billion) and Warren Buffet ($47 billion). The wealth of all three men rose dramatically. Over the last several years Slim Helú made roughly $27 million a day compared with the average daily income of $16.50 for Mexican workers.

The rich in India and China gained among the most. “For the first time, mainland China has the most billionaires outside the US,” Forbes said in its statement. “US citizens still dominate the ranks, but their grip is slipping.”

The hedge fund managers and financiers on the list benefitted directly from the bank bailout, which transferred huge sums of public funds into the accounts of the largest financial companies. But the billionaires in every other industry were the indirect recipients the government’s wealth transfer program also.

The Wall Street Journal, commenting on the figures, wrote, “How did the world’s rich get so much richer? Stock markets…. In short, what the stock market had taketh, the stock market hath giveth back–-at least to the billionaires.”

But the stock market recovery itself is no accident; it was the direct outcome of policies pursued by both US political parties. The bailout has been financed by a policy of fiscal austerity and high unemployment. The rapid increase in the wealth of the billionaires is the result of the impoverishment of tens of millions; it is the other face of mass unemployment, poverty, utility shutoffs, and foreclosures.

Aside from direct government handouts to the banks and super-rich, the major driver of the recovery of corporate profits—and thus the stock market—was productivity growth and corporate downsizing.

In 2009, the unemployment rate rose from 7.7 to 10 percent, three million jobs were lost, and wages fell dramatically. Millions of families lost their homes and became dislocated. But productivity, the amount of output that is produced from each hour of work, rose by 7 percent.

The money freed up through the destruction of social programs, higher employee output, and corporate restructuring has found its way into the pockets of the people on Forbes’ list.Andre Damon is a frequent contributor to Global Research.Global Research Articles by Andre Damon

How do you save a city that is dramatically declining like Detroit? Well, for the mayor of Detroit the answer is simple – you bulldoze one-fourth of the city. Faced with a 300 million dollar budget deficit and a rapidly dwindling tax base, Detroit finds itself having to make some really hard choices.

During the glory days of the 1950s, Detroit was a booming metropolis of approximately 2 million people, but now young people have left in droves and the current population is less than a million. The true unemployment rate for those still living in Detroit is estimated to be somewhere around 45 to 50 percent, and poverty and desperation have become entrenched everywhere. In many areas of the city, only one or two houses remain occupied an an entire city block. In fact, some areas of Detroit have so many vacant, burned-out homes that they literally look like war zones. And yes, it is true that there are actually some houses in Detroit that you can actually buy for just one dollar. According to one recent estimate, Detroit has 33,500 empty houses and 91,000 vacant residential lots. So what can be done when an entire city experiences economic collapse?Read Entire Article

PARKERSBURG, W.Va. – The retirement nest egg of an entire generation is stashed away in this small town along the Ohio River: $2.5 trillion in IOUs from the federal government, payable to the Social Security Administration.

It’s time to start cashing them in.

For more than two decades, Social Security collected more money in payroll taxes than it paid out in benefits — billions more each year.

Not anymore. This year, for the first time since the 1980s, when Congress last overhauled Social Security, the retirement program is projected to pay out more in benefits than it collects in taxes — nearly $29 billion more.

Sounds like a good time to start tapping the nest egg. Too bad the federal government already spent that money over the years on other programs, preferring to borrow from Social Security rather than foreign creditors. In return, the Treasury Department issued a stack of IOUs — in the form of Treasury bonds — which are kept in a nondescript office building just down the street from Parkersburg’s municipal offices.

Now the government will have to borrow even more money, much of it abroad, to start paying back the IOUs, and the timing couldn’t be worse. The government is projected to post a record $1.5 trillion budget deficit this year, followed by trillion dollar deficits for years to come.

Social Security’s shortfall will not affect current benefits. As long as the IOUs last, benefits will keep flowing. But experts say it is a warning sign that the program’s finances are deteriorating. Social Security is projected to drain its trust funds by 2037 unless Congress acts, and there’s concern that the looming crisis will lead to reduced benefits.

“This is not just a wake-up call, this is it. We’re here,” said Mary Johnson, a policy analyst with The Senior Citizens League, an advocacy group. “We are not going to be able to put it off any more.”

For more than two decades, regardless of which political party was in power, Congress has been accused of raiding the Social Security trust funds to pay for other programs, masking the size of the budget deficit.

Remember Al Gore’s “lockbox,” the one he was going to use to protect Social Security? The former vice president talked about it so much during the 2000 presidential campaign that he was parodied on “Saturday Night Live.”

Gore lost the election and never got his lockbox. But to illustrate the government’s commitment to repaying Social Security, the Treasury Department has been issuing special bonds that earn interest for the retirement program. The bonds are unique because they are actually printed on paper, while other government bonds exist only in electronic form.

They are stored in a three-ring binder, locked in the bottom drawer of a white metal filing cabinet in the Parkersburg offices of Bureau of Public Debt. The agency, which is part of the Treasury Department, opened offices in Parkersburg in the 1950s as part of a plan to locate important government functions away from Washington, D.C., in case of an attack during the Cold War.

One bond is worth a little more than $15.1 billion and another is valued at just under $10.7 billion. In all, the agency has about $2.5 trillion in bonds, all backed by the full faith and credit of the U.S. government. But don’t bother trying to steal them; they’re nonnegotiable, which means they are worthless on the open market.

More than 52 million people receive old age or disability benefits from Social Security. The average benefit for retirees is a little under $1,200 a month. Disabled workers get an average of $1,100 a month.

Social Security is financed by payroll taxes — employers and employees must each pay a 6.2 percent tax on workers’ earnings up to $106,800. Retirees can start getting early, reduced benefits at age 62. They get full benefits if they wait until they turn 66. Those born after 1960 will have to wait until they turn 67.

Social Security’s financial problems have been looming for years as the nation’s 78 million baby boomers approached retirement age. The oldest are already there. As that huge group of people starts collecting benefits — and stops paying payroll taxes — Social Security’s trust funds will shrink, running out of money by 2037, according to the latest projection from the trustees who oversee the program.

The recession is making things worse, at least in the short term. Tax receipts are down from the loss of more than 8 million jobs, and applications for early retirement benefits have spiked from older workers who were laid off and forced to retire.

Stephen C. Goss, chief actuary for the Social Security Administration, says the crisis has been years in the making. “If this helps get people to look more seriously at that in the nearer term, that’s probably a good thing. But it’s only really a punctuation mark on the fact that we have longer-term financial issues that need to be addressed.”

In the short term, the nonpartisan Congressional Budget Office projects that Social Security will continue to pay out more in benefits than it collects in taxes for the next three years. It is projected to post small surpluses of $6 billion each in 2014 and 2015, before returning to indefinite deficits in 2016.

For the budget year that ends in September, Social Security is projected to collect $677 million in taxes and spend $706 million on benefits and expenses.

Social Security will also collect about $120 billion in interest on the trust funds, according to the CBO projections, meaning its overall balance sheet will continue to grow. The interest, however, is paid by the government, adding even more to the budget deficit.

While Congress must shore up the program, action is unlikely this year, said Rep. Earl Pomeroy, D-N.D., who just took over last week as chairman of the House subcommittee that oversees Social Security.

“The issues required to address the long-term solvency needs of Social Security can be done in a careful, thoughtful and orderly way and they don’t need to be done in the next few months,” Pomeroy said.

The national debt — the amount of money the government owes its creditors — is about $12.5 trillion, or nearly $42,000 for every man, woman and child in the country. About $8 trillion has been borrowed in public debt markets, much of it from foreign creditors. The rest came from various government trust funds, including retirement funds for civil servants and the military. About $2.5 trillion is owed to Social Security.

Good luck to the politician who reneges on that debt, said Barbara Kennelly, a former Democratic congresswoman from Connecticut who is now president of the National Committee to Preserve Social Security and Medicare.

“Those bonds are protected by the full faith and credit of the United States of America,” Kennelly said. “They’re as solid as what we owe China and Japan.”

EUOBSERVER / BRUSSELS – The European Commission has said it is seeking answers following allegations that Wall Street investment banks helped Greece hide the extent of its debt.

“Eurostat [the EU’s statistics agency] has, following these reports, already requested from the Greek authorities an explanation by the end of February,” said EU economy spokesman Amadeu Altafaj Tardio at a news conference in Brussels on Monday (15 February).

Over the last decade, Wall Street banks facilitated Greek

government efforts to skirt European debt limits, reported the New York Times over the weekend. One deal created by Goldman Sachs helped obscure billions in debt from officials in Brussels, the paper alleges.

Goldman executives approached Greece as recently as last November with complicated financial instruments to push debt from the country’s health care system far into the future, it continues, adding that similar arrangements have been struck in the past. Athens says it did not purse the latest Goldman proposal.

Complicated currency swaps are at the eye of the latest storm. The commission said the swaps are a legitimate government management tool provided “they are calculated from observed market rates.”

“This is something that we will have to assess based on the information we will receive,” said Mr Tardio.

“There was an excessive deficit procedure methodological visit to Greece in 2008 and at the time Eurostat did not receive information about such transactions,” he said.

The commission is to come forward shortly with a proposal to give Eurostat auditing powers, with the latest allegations emphasizing the need for greater scrutiny, said Mr Tardio.

The head of China’s central bank has given the strongest signal yet that the country will move away from pegging its currency to the dollar, but he said any changes would be gradual.

At the annual session of the legislative National People’s Congress in Beijing, Zhou Xiaochuan, governor of the People’s Bank of China, said that the days of the “special yuan” policy were numbered. He described the dollar peg as a “temporary” response to the global financial crisis, but gave no timescale for any change in policy. The currency has been pegged at about 6.83 yuan per dollar since July 2008.

Many economists expect China to allow the yuan to appreciate slightly this year, but the cautious tone by Mr Zhou means that any change may not happen for some time. He said that the central bank would maintain the “basic stability” of the currency. So, despite the fact that the Chinese economy grew by 10.7pc in the fourth quarter of last year, the country’s loose monetary policy looks set to continue.

“If we are to exit from irregular policies and return to ordinary economic policies, we must be extremely prudent about our choice of timing,” Mr Zhou said. “This also includes the [yuan] exchange rate policy.”

China’s currency policy has been subject of fierce debate, particularly in the US and Europe, with the country’s central bank accused of keeping the yuan artificially low to promote a domestic exports boom. An artificially lower currency makes the country’s goods and services more competitive, leaving other exporters at a disadvantage. Jim O’Neil, Goldman Sach’s chief economist, thinks the Chinese should allow their currency to appreciate by as much as 5pc.

In recent week President Obama has been vocal on the issue of the artificially low currency. “China and its currency policies are impeding the rebalancing [of the global economy] that’s necessary,” Mr Obama told Bloomberg last month. “My goal over the course of the next year is for China to recognize that it is also in their interest to allow their currency to appreciate because, frankly, they have got a potentially overheating economy.”

The relative value of the dollar is important to China, as the country is the world’s largest holder of US government debt. According to data form the US Treasury Department, China held $894.8bn (£591bn) of US Treasury securities at the end of December. Roughly two-thirds of the country’s reserves are believed to be in dollars and dollar-denominated assets such as gold.

“The US dollar is still an extremely important currency, playing a key role in international trade, cross-border capital flows, direct investment as well as in determining whether we can smoothly overcome the global financial crisis,” Mr Zhou said.

When China eventually abandons the peg, the country will have to manage its exit strategy carefully. If the central bank allows a gradual appreciation of its currency, which would be the best strategy for its exporters, there could be an inflow of funds from speculators betting on further appreciation. However, a one-off revaluation could deal a severe blow to the country’s manufacturing sector.

Iceland’s voters expressed their outrage on Saturday against bankers, the government and what they saw as foreign bullying, overwhelmingly rejecting a plan to pay $5.3 billion to Britain and the Netherlands to reimburse customers of a failed Icelandic bank, Sarah Lyall reported in The New York Times.

With about 98 percent of the votes counted Sunday, roughly 93 percent of voters said no to the plan, in the first public referendum ever held on any subject in Iceland. Less than 2 percent voted yes, and the rest of the votes were invalid.

But the referendum was more symbolic than substantive, and the Icelandic government hastened to make clear that Iceland would still pay back the money, albeit on different terms from the ones rejected.

“We want to be perfectly clear that a ‘no’ vote does not mean we are refusing to pay,” Finance Minister Steingrimur Sigfusson said. “We will honor our obligations. To maintain anything else is highly dangerous for the economy of this country.”

In the Netherlands, Finance Minister Jan Kees de Jager said Saturday, as the first results were being reported, that Iceland’s referendum was an “internal matter,” the Dutch news service ANP reported.

Still, Mr. Jager noted that no agreement was operative yet for the repayment. He said in a letter to his Icelandic counterpart that Britain and the Netherlands were committed to “finding a solution in line with international standards,” the news service reported.

International standards may have more importance for Iceland than other countries, as it was invited last month to begin accession talks with the European Union.